A-1.01-Economic Activities Responsible Earning, Spending, Saving, and Borrowing.
POBF 1.01: Economic Systems
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Understand the Role of Business in the Global Economy. 1 Unit 1: Economic Systems
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Transcript of POBF 1.01: Economic Systems
Understand the Role of Business in the Global Economy.
1Unit 1: Economic Systems
Understand Economic Systems.
2Unit 1: Economic Systems
What is Economics?
Satisfying needs and wants
Basic economic problem
Six steps of economic decision-making
Main types for economic systems
Market economy self-regulating principles
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What is Economics?
Satisfying needs and wants
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Classical Definition…
“Economics is the science that deals with the production, distribution, and consumption of goods and services, or the material welfare of humankind”. (Dictionary.com, 2012)
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Casual Definition…
“Economics is the study of choice under scarcity”.
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Mr. Cox’s Definition…
“Making choices based on the limited supply of products to satisfy unlimited desires”.
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What is YOUR definition of economics?
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Really, though it’s about answering questions that often have few easy
answers.
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What happens when oil eventually runs out?
Why can’t I just get a scholarship to go to college?
Why can’t the unemployed just get jobs?
Why do people get so excited about interest rate changes?
Why do things cost so much more than they did for our grandparents?
Why do I have to buy an operating system from so few companies?
Why is the price of a plane ticket so much LESS on Tuesdays?
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Satisfying Satisfying Needs and WantsNeeds and Wants
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What are needs?What are wants?
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What are goods?
What are services? The United States economy is the largest producer of goods and services in the world.
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How do businesses use economic resources to produce goods and services?
The types of economic resources are:◦Natural◦Human◦Capital
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What are natural resources?
Many natural resources are nonrenewable.
What are human resources?
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What are capital resources?
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What is the basic economic problem?
What is scarcity?
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For example…
When oil is processed into heating oil there is
less available to be used in making gasoline.
This can affect the price of gasoline since
the supply of crude oil (oil that has not been
processed) available is more scare.
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What is the purpose of economic decision-making?
What happens to choices in a tradeoff?
What is opportunity cost ?
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Tomorrow…
The Basic Economic Problem
Economic Decision-Making Process
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The basic economic problem
Six steps of economic
decision-making
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What are needs?What are wants?What is scarcity?
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How to satisfy our UNLIMITED wants
and needs with LIMITED resources.
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Part One:
No matter what we have we ALWAYS want more (or better).
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Regular Cell Phone Smart Phone
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Part Two:
However…there is a LIMITED amount of resources to satisfy our wants/needs.
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Lumber Forests
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So…choices must be made to handle these resources EFFICIENTLY.
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The difference in the choices made are called OPPORTUNITY COSTS or TRADE-OFF’s.
Opportunity costs exist when you can’t do (or have) something because of the choice you made.
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What is economic decision-making? What are the six steps of economic
decision-making?1. Defining the problem2. Identifying choices3. Evaluating the advantages and disadvantages
of each choice4. Choosing one choice5. Acting on the choice6. Reviewing the decision
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Economic Decision-Making Economic Decision-Making continuedcontinued
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Try to solve a problem
Problem: Adjust the foundation of a house
Choices: Ignore the problem
Contact companies located in the same
city
Contact companies located in the next city
Contact companies located in other cities
What choice would you make?35Unit 1: Economic Systems
Some advantages: location of local companies, companies that guarantee of services, and companies that provides simple explanation of necessary services
Some disadvantages: prices for services and location of company in next city or other cities
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Choosing one choice: A local company that guarantees services and provides simple explanation of services.
Acting on choice: Schedule for local company to provide services of adjusting foundation of house.
Reviewing decision: Routinely check on condition of foundation of house.
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Main types for economic
systems
Market economy self-
regulating principles
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Tomorrow…
Types of Economic Systems
Market Economy Self-regulating Principles
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What are the three economic questions that all economies
must answer?
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o What to produce?o How to produce?o For whom to produce?
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What is an economic system?
The main types of economic systems are:◦Command or Communist◦Market◦Traditional◦Mixed
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Who owns the resources in the main types of economic systems?oCommand
oMarket
oTraditional
Who answers the economic questions?
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oCentered on family
oGovernment
oThe people
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•What is capitalism?
•What type of economic system does the United States have?
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The four principles of U.S. economic system are:
• Private property• Freedom of choice• Profit • Competition
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What is the role of consumers in a market economy?
A consumer includes individuals, businesses, and government.
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What is the role of producers in a market economy?
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The market economy is based on the principles of supply and demand.
◦What is demand?◦What are some examples of consumer
demand?◦What is supply?◦What are some examples of how
producers establish supply?
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Intro to Business, 6e, Thomson South-WesternUnit 1: Economic Systems
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Intro to Business, 6e, Thomson South-Western
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Market (equilibrium) price is the point where supply and demand are equal.
Intro to Business, 6e, Thomson South-Western
Unit 1: Economic Systems
